New principles for adjusting tax revenues and costs applicable as of 1 January 2016
As of 1 January 2016, the provisions of law will clarify precisely when revenues and tax deductible costs are to be adjusted if a corrective invoice is issued or received by taxpayers. Previously this issue was not regulated by statutory law and, according to positions of tax authorities, the moment of adjusting revenues depended on the cause of adjustment, while the moment of adjusting tax deductible costs depended on whether the cost was classified as directly related to the revenues of the year concerned or as the so called indirect cost. In addition, the legislator has decided to remove the provisions on adjustment of tax deductible costs because of non-payment of the liability (Article 15b of the CIT Act, Article 24d of the PIT Act), as their application required a lot of administrative work from taxpayers.
As of the beginning of the new tax year, commencing in 2016, taxpayers’ doubts what is the right moment for recognising corrective invoices under tax revenues and costs will be finally cleared. As the PIT Act and the CIT Act in their wording applicable to date did not contain legal regulations to that extent, and in most cases the position taken by tax authorities was not in favour for taxpayers, it was often necessary to adjust revenues or costs “retroactively”. In many cases, such procedure was connected with a troublesome obligation to adjust annual returns and pay interest on tax arrears. As of 2016, if adjustment of the invoice is not caused by miscalculation or an obvious mistake, it will be possible to recognise corrective invoices when issued (under revenues) or when received (under tax deductible costs).
The amended PIT Act and CIT Act will contain the provisions stating explicitly how to account for corrective invoices for tax purposes. In principle, if adjustment is not caused by miscalculation or another obvious mistake, it will be made by decreasing or increasing the revenues earned (or, in the case of adjustment of costs, accordingly by decreasing or increasing the costs incurred) in the settlement period in which the corrective invoice was issued (or received in the case of adjustment of costs). So if the invoice correcting the value of a sale transaction effected by the taxpayer relates to e.g. a discount granted to the customer or returned goods, it will be recognised for tax purposes in the month of its issue. The date of issue of the original invoice will be of no relevance here because the interim regulations stipulate that the new principles will be applicable also to adjustments of revenues earned and adjustments of tax deductible costs incurred before the date of entry of the amended laws into force. If, however, adjustment is necessary because of a numerical error, like e.g. a wrong unit price, the taxpayer will still have to make “retroactive” adjustment (the new regulations will not apply in such situation).
The legislator has also envisaged solution to a mathematical problem which may happen if there are no sufficient tax revenues (or costs) in the period when adjustment entailing their decrease is to be made. In such case, the taxpayer will be required to do the following:
- when adjusting revenues – to increase tax deductible costs by the amount by which revenues cannot be decreased,
- when adjusting costs – to increase revenues by the amount by which tax deductible costs cannot be decreased.
What is important, the amended laws envisage also certain exclusions, and special attention should be paid here to impossibility to apply the provision on current adjustment if the latter relates to revenue connected with a tax liability which has been already barred by limitation. In the case of adjustment of costs, the legislator has also taken into account the possible overlapping of consequences arising from the provisions applicable till the end of 2015 and relating to adjustment of costs in connection with non-payment. It will not be possible to apply the provisions on current adjustment to adjustment of tax deductible costs to which Article 15b of the CIT Act or Article 24d of the PIT Act is applicable. So it will be impossible to adjust costs which have not been paid and therefore have been already decreased by the amount not paid in due time as required by statutory law.
Changes to be implemented should be definitely perceived in a positive way. Starting as of 1 January 2016, taxpayers will be sure when they should recognise a corrective invoice for tax purposes. Decreasing costs or revenues by amounts higher than those declared in the current period could become problematic, but thanks to flexible solutions proposed by the legislator (which consist in increasing revenues in the case of adjustment of costs and by increasing costs in the case of adjustment of revenues), taxpayers will not have to declare negative values or carry forward adjusted amounts to the next settlement period.